4 Steps for a New Financial You in 2020
- Author: William Asher
- Posted: 2024-04-14
Take Stock of Your Financial Situation
The first thing that you need to do is understand what you are facing in the coming year. While it seems self-explanatory, you should study each of your debts and review your income situation and where you can expect money. You may have certain debts that are coming due or that will accelerate in 2020. Make sure that you know the terms of your debts to know what you will have to pay and when.
In part, this will also mean that you spend some time reviewing your finances from the previous year. This review will give you a handle on anything that has changed in 2019 and you will be able to detect trends in your finances. It is difficult to plan for the coming year if you do not know what has happened to you previously. In other words, you cannot set the proper goals when you are not intimately familiar with your own finances. This review will include studying your own spending from the previous year to detect any patterns and track exactly where your money went.
Set Broad Goals
Once you are familiar with your previous year, you should begin to contemplate where you want to be in the coming year. Of course, you do not always have complete control over your financial situation as you cannot predict what unforeseeable bills you have coming your way and you cannot cut certain necessary expenses.
However, you do have some control over your finances because a large part of your spending is discretionary. Within that construct, you can sketch out some broad goals because your discretionary spending pool is what you have to work with when you are trying to save or pay back debt.
Without fail, one of your broader goals for the year should be either saving money or reducing your debt. This goal should include a specific monetary target. Without specificity, you will likely not be able to hold yourself accountable as you try to reach your goal.
Fill in the Specifics
Once you have the broader goal in mind, you will then need to figure out how to get there. Knowing your previous year's spending is helpful in devising the specifics of your plan. You can decide that you want to save the down payment for a house and you will begin to get there by eliminating eating out and packing your own lunch to bring to work. Alternatively, you can decide to cut money from your entertainment budget to be able to devote an extra $150 each month to paying down your debt.
It is important that these steps are realistic. If your financial plan of action is unrealistic, you will never be able to stick to it for an entire year and will abandon it relatively quickly. It is vital that your plan is in place at the start of the New Year so you can begin to act on it. Without specific details, your goals will just be vague and you will flail about trying to reach them.
Prepare Yourself Mentally
Acting according to a financial plan takes discipline and dedication. Since your financial plan may involve some sort of sacrifice, it is vital that you are all in at the start of 2020. This requires that you have an honest conversation with yourself ahead of time and make sure that you are fully committed to what you are doing. Life is different when you are working towards your financial goals. You are replacing unrestrained consumption with the feeling of knowing that you are building your financial house. This is a different mindset and it is vital before you embark on your new journey that you understand what is coming. Preparing yourself is not something that you can simply do overnight but is something that takes a little bit of time so make sure that you start anticipating changes well before the start of 2020.
